Golden Goose Gets Even More Alt-A Loans From Fed Reserve

November 28, 2007

Elaine Meinel Supkis

I want to preserve this bizarre headline page from Market Watch. The talking heads on TV have convinced everyone that Bernanke Santa Claus is planning on dropping a huge safe and a grand piano on the economy's head and this will bring us endless wealth and happiness. Of course, we are falling into the Japanese deflationary pool except we will refuse to shrink our consumer base. The real elation here is the idea that all we need to regain Paradise is to do what we have done for the last 40 years: spend and spend and don't pay off any principal, go for those teaser rates out of the Japanese carry trade!

U.S. Stocks Stage Biggest Two-Day Rally Since 2002; Banks Gain

U.S. stocks staged the biggest two- day rally in five years, led by financial shares, after Federal Reserve Vice Chairman Donald Kohn buttressed expectations for another interest rate cut.

Citigroup Inc., Lehman Brothers Holdings Inc., Morgan Stanley and Goldman Sachs Group Inc. rose more than 5 percent as banks and brokerages in the Standard & Poor's 500 Index gained the most since 2002. EBay Inc. and Amazon.com Inc. helped push the Nasdaq Composite Index to a 3.2 percent gain after Sanford C. Bernstein & Co. forecast a ``strong'' fourth quarter for both.

``Kohn's comments just add to a perception that the Fed is embarking on a sustained path of easing,'' said Michael Metz, the New York-based chief investment strategist at Oppenheimer Holdings Inc., which manages $60 billion. ``There's also huge relief that the worst of the financial crisis may be behind us.''

Well, well. well. Look who benefited the most from the rumors that the Bank of Japan Federal Reserve is going to keep interest rates at historic lows for another 15 years drop interest rates to below Greenspan's 1% rate in 2003. Why, it has been only two whole years since the rates were below 2%! And look at what happened! We went into this banking crisis and economic collapse. What should we do?

Of course, the answer for all small children and irresponsible adults is to ask Santa Claus to give everyone lots of free toys. I have warned bear traders and short meisters to beware, the Gollum Sachs people have more than one ring to rule them all! They are not finished with us all yet! Not at all.

I said some time ago, the game won't end until the Chinese slam the door shut on our fingers. Their plan is to feed, nay, stuff the Golden Goose before eating its liver. And the goose is still waddling about. Now, a smart goose would notice the intentions of the Dragon feeding it but this particular goose imagines it can hang out a few years longer and then attack the Dragon or declare bankruptcy and then attack the Dragon.

This foolish plan has obvious flaws. One of which is, the Dragon expects the Golden Goose to lay a nuclear egg. So it has been working with the Russian Bear to deal with this possibility. We could still get WWIII but both the Bear and the Dragon have experienced world wars before and have no desire to have one now. So I expect them to give the Golden Goose some room and more feed and will wait, patiently.

``If the Fed can be easy enough to keep us out of recession, the market will be higher one year forward,'' said Philip Orlando, chief equity market strategist at Federated Investors Inc. The firm manages $44 billion of stocks.

OK: $44 billion in stocks. If this were to be a normal bear market, usually stocks lose about 30-75%. This is a huge drop. If one waits it out, one can recover and more but time is money. And money with interest costs more as time passes. Since most of our financial speculative system ended up being based on people taking on loans from the Magic Box in Japan, they have to turn these loans over like clockwork because the carry trade loans are not for 30 year mortgages, these are short term loans. Let's call them 'teaser rates.' You are stuck owing the whole amount but the game has become a system of simply going out and getting new loans.

The M3 money supply growth rate for Europe, the US and Japan has totally outstripped the rate of growth and gross amount of the world. The other day, I drew a chart showing how this amount of new money growth has been so high, it is roughly 11X higher than the rest of the world's M3 growth. If we look at the growth of debts in these same three economic centers, it has also grown massively and rapidly. Public and private as well as corporate debt has shot upwards since 2001. Much of this sudden surge is due to 'easy' loans.

The reason why low interest rates make everyone happy is, no one plans to ever pay off anything but the interest so this means essentially, houses, stocks, bonds, cars, trips to Disney World, all this will be pretty much 'free'. As in 'a gift from Santa Claus.' Of course, this Santa Claus has claws. And scales and big, red and golden wings. And it has plans for us that we won't like very much when it decides it is time to collect its debts due.

President Bush announced on Wednesday that Keith Hennessey will become director of the National Economic Council,

replacing Al Hubbard, who is joining a growing line of top presidential advisers exiting the White House as the Bush administration heads into its final year.

Hennessey, who came to the White House in 2002, is Hubbard's deputy and has been deputy to two previous directors of the council. He served as a top budget aide to Sen. Trent Lott, R-Miss., and worked for the Senate Budget Committee.

''Keith has been an important member of my White House team for more than five years,'' Bush said in a statement. ''He has served as the deputy to three directors of the National Economic Council, and has worked on a broad range of economic policy issues.''

Five years of utter failure! All these guys are like ingrown toenails. You can cover them with Cinderella's glass slipper but you will still see the red, swollen mess inside. Yuck. These guys have been negotiating and ripping apart regulations that protect us from bubbles for the last 40 years and the last thing we need for advising any President is anyone who is connected to any of this present mess. This excludes a lot of people. But seriously, how else can we change course?

The President, instead of insisting on telling the truth, wants lies. Bush spend his entire life lying about nearly everything. He is a multi-arrested criminal AWOL who can't tell where he was from 1972-1975, for example. A long lost weekend binge. He couldn't succeed at any business and his family has to run off to Arab kings and Chinese overlords in order to make money. I call this 'treason' but it seems many Americans like that dunce, Cramer, think it is totally, like, RAD that we sell ourselves to the Asian powers who will be our bosses.

England is now very mired in a banking crisis due to the huge overhead of debt which is like a dead hand on the Ship of State. If they make it easier to get loans, this will not fix anything since the nation is over 100% in debt, so to speak. The USA still has room to go before reaching that particular ceiling. This is why I warned bears that we still have a ways to go before we are served for dinner. Time to waddle about the courtyard, going 'honk, honk.' I believe the intention is to drive us to that fatal 100% so the ruling class can demand the destruction of all social services. This cruel future is how they plan to depopulate the earth. They do not want nuclear war, they want what they did to Iraq.

Disarm a nation via the UN weapons inspectors, attack and wreck everything, kill a million people and make 3 million refugees, cut food and medicine so the children die. Terrorize the survivors and build walls and make the whole place a prison. This cruel form of the Japanese Co-Prosperity Sphere we stopped in 1945 is now our model. But it is very expensive. And to pay for this, the rulers are trying to cut funds flowing to citizens who want to stay alive. Since the occupation of angry nations is very expensive, the ruling elites skim off about 20% of the costs and this is making them all very rich. They can't skim the programs that keep the elderly or disabled alive. These are considered losing propositions which is why they are increasing money for mercenaries in Iraq while cutting doctor's reimbursements for Medicaid and Medicare.

The departing Financial Advisor to our criminal leader wanted desperately to tax health insurance for workers so as to discourage them getting health insurance, for example. This proves to me, the Golden Geese ruling us want us dead. Of course, they are too stupid to figure out, this program is being set in motion for themselves.

Defaults by Eight Companies in CDX `Conceivable,' Wachovia Says

Trading in a benchmark credit derivatives index suggests eight of the 125 companies in the index may default, a situation that ``is certainly conceivable'' if the economy deteriorates significantly, Wachovia Corp. analysts said.

The Markit CDX North America Investment Grade Index, used to speculate on the creditworthiness of companies including mortgage lender Countrywide Financial Corp. and homebuilder Lennar Corp., is trading at levels that imply at least eight defaults in the next five years, Wachovia Securities analysts led by Richard Gordon in Charlotte, North Carolina, wrote in a report yesterday.

You see, if interest rates are super-low, then people can't make up for inflation and the low rates cause inflation so we get this cycle where people need to invest in dangerous, risky schemes in order to earn much more than if they simply plunked down their cash in a bank and collected interest! The CDX problem can be solved by dropping rates to 0.5% like in Japan. Then the lenders can borrow and never pay any principal and they can, in turn, lend to others at this same deflationary way but it causes inflation in key sectors which is property, oil and gold. And inflating these things destroys the INDUSTRIAL BASE. As we can plainly see. When Greenspan dropped rates to 1%, we didn't see any industrial growth, we saw a wild game of bidding up various non-capitalist things like gold, artwork, townhouses, base ball players, etc. Astronomical sums were offered for vapid things that are most definitely not expanding the industrial base or improving infrastructure like railroads or ports.

Below is a chart I sketched showing how the Fed wishes these deliberate bubbles they make should make us all richer while the lower chart shows what is actually happening if we look at all the data with a sharp eye and deduct inflation from the statistical background numbers. The 2000 bubble was bigger than the 2006 bubble when it popped. As the interest rates are capriciously reset, each time this is done to give the Golden Goose more food, the beneficial effects are smaller. The US economy is definitely shrinking. Since 70% of our economy is simple consumption, this means the ability to buy things is declining. To keep up the illusion of economic good health, very low loans are offered. Only these have to be attached to something, anything.

Which is why it gets attached to houses. And here is the rub: people have very little housing to offer for these loans. So they can't tap into these marvelous interest rates. The stock market today took off like a rocket due to a perverse faith in the notion that if the economic data is very bad, the Fed will bail everyone out and so everyone anticipates this and has a big party while waiting for this rescue. Of course, the Fed should punish them for this! If there is a giant surge of buying before the Fed discusses rates, this means the pain is FAKE. And the Fed should leap upon them all and RAISE RATES. Lord knows, my money sitting in the bank isn't making me richer! If they cut rates, this is THEFT. Stealing my money in order to give speculators on Wall Street a wild party pisses me off.

The Next Subprime Dominos to Fall: Junk Bonds and Hedge Fund Risk Insurers

By: John_Mauldin
The economic climate that enabled a transformation in the credit markets over the last five years simultaneously prevented the system from being tested. The machine hummed at ever increasing velocity as long as companies received cheap financing, borrowers repaid lenders, and expectations remained cheerful. A downturn in the real economy, or just expectations of pending credit problems, needed to arise before the imbedded leverage in the system could cause harm. As soon as either occurred, however, the machine would screech to a halt.

Given their subordination in the capital structure, junk bonds (or, euphemistically, high-yield bonds) are a logical place to look for the first signs of trouble. Statistics of high-yield issuance reveal relaxed lending standards in a marketplace determined to ignore risk. In each year since 2004, more than 40% of all new debt held ratings below investment grade. For perspective, the proportion of new paper of such poor quality issued in each of the last four years far exceeded the proportion of such issuances in any year since the late 1980s.

Why are we repeating this mistake? The Fed told us, they dropped rates suddenly while the Congress and the President dropped taxes and declared not one but two wars, this was all done because our economy was contracting. They claim they are actually a branch of the Soviet Union's five year plan type of government. Their sole function is to regulate prices [WHAT THE HELL???] and provide liquidity! This bizarre idea is muddied further by the belief that the Fed exists in order to CREATE JOBS. What?

This is why they play these stupid games. The Chinese are restricting the ability of banks to issue loans in order to PREVENT a bubble which is caused by banks lending at a too-low interest rate to irresponsible people. I remember before the Asian Currency Crisis, banks in Thailand, the epicenter of that crash, were lending money to anyone and everyone on very easy terms. People picked up money and then went bust in a matter of months, not many years of struggle.

The US is like that. A huge number of people who got loans in 2005 and 2006 defaulted in less than one year! This is just amazing and stupid and a good way to initiate a currency crisis! So what did the US and the IMF do to Thailand when they did this?

Did they let Thailand drop interest rates and do more loans? Or did they HAMMER THAILAND and force them to save and drive up interest rates? Ah, yes. We were very cruel when we did this. It started the infamous IMF riots there. As it does, everywhere. Since the G7 run the IMF and since they are co-conspirators in the scheme to keep the USA spending and spending, importing and importing, far from punishing us, they pet us.

And China feeds us. We are the Golden Goose. Aka, Dinner.

Culture of Life News Main Page

Comments

[PJSV]

Elaine,

Please explain to us this report http://www.m-cam.com/display_news?id=240

[PJSV]

Elaine,

Please explain to us this report http://www.m-cam.com/display_news?id=240

[Bugout]

Another excellent analysis in the form of a fable, no less! I would like to suggest a slight semantic change, though. Where you call the elites stupid, I prefer to think of them as clever fools, because they come up with complicated plans, scams, and schemes without being able to see some of the obvious pitfalls. I suggest it only so as to prevent underestimating the evil they can still accomplish. As the list of measures being taken to control dissent inside the United States is lengthy and comprehensive, stupid does not seem the proper epithet.

In a perverse way, I am grateful to have had George W. Bush and his neoconservative advisors as the administration these last few years because his actions have pushed China and Russia to take actions such as you have documented. Otherwise I fear too few would have noticed the coming changes or felt the urgency to take any sort of action.

As an aside, since you mentioned they plan to decrease the population, is it not comforting to know that some bad ideas such as eugenics never really die.

[DeVaul]

Bugout is right about the ruling elites. They are not stupid, but they might very well end up like spiders who get caught in their own webs.

[Elaine Supkis]

They are stupid. They forgot about the French Revolution, the Russian Revolution, the Chinese Revolution, the Glorious Revolution {that's the one that set my ancestors fleeing to the New World] and other problematical events.

Rule of thumb: don't piss off the peasants all at once. They have pitchforks and can get quite rowdy. But then, this is a lesson that never seems to be learned. To the Barricades!

[DeVaul]

Here is a hilarious quip on the U.S. dollar:

http://www.silverbearcafe.com/private/counterfeit.html

[Bugout]

Dear Madame Supkis,
As I have already expressed my admiration for your intellectual abilities, it fills me with great sadness that you would write something so ignorant. The elites have not forgotten about the possibility of revolution, in fact they have laid plans for decades to prepare for just such an eventuality. I would highly recommend that you read some of the history of education in this country, particularly the last 40 years, the writings of John Taylor Gatto are illuminating. In fact, if I am not mistaken he lives in the same county as you, perhaps the same township. Another facet was begun with the War on Drugs, turning our local police forces into interior security forces such as that found in Egypt. I would recommend perusing William Norman Grigg for much evidence on that process. Any of dozens of progressive, politically speaking, blogs would provide evidence of acts in Congress or executive orders by the administration laying the groundwork for complete usurpation of Constitutional government.

On what basis do you think all the peasants will rise up? It is true and how I lament it that, of the hundreds of people I know, I cannot discuss such events with more than a handful because they refuse to see, are frightened, or like the way things are headed. I am thus left with the Internet to find people who share this concern, but are often hundreds if not thousands of miles away. You mention arguing with your neighbors over the financial crises and failing to convince them. Do you honestly think that they will stand with you when it matters most? The Internet is a wonderful tool, but it is not an adequate substitution for a real community that will unite in defense of one another. One example that I find particularly troubling is the reports of gun confiscation in Louisiana after the hurricane. I am not aware of a single case where someone successfully retained their firearms or fired in defense of their rights when the authorities were clearly in the wrong. Compare that, if you will, to the reaction of those British citizens in Massachusetts when the British army moved out from Boston to confiscate the weapons cache at Concord.

Now I am aware that these matters on not on topic for your post and that I have most likely offended you for speaking so plainly. For that I apologize, my desire is not to offend but to forewarn. If you prefer that I express such long-winded statements in e-mail form or refrain completely from commmenting, then speak and I shall comply.

With Deepest Regards,
Bugout

[Elaine Supkis]

I have found myself quite accidentally in the middle of uprisings in the past in other countries as well as in the US. They happen with tremendous suddeness. One day, all is quiet, the next, everyone is in the streets, yelling!

You never know.

Elaine